By the word “Exit Strategy”, the immediate meaning pops up in your mind is to plan an escape from something. It is the jargon used in Real Estate investment. To be exact, Exit Strategy can be defined as
“The process of knowing when and how “to cash out” a real estate investment”
In other words, it is the process in which investors determines the way to put in or put out cash in real estate investment. Generally investors already have a plan what to do with their property, even before actually buying it.
Also Read: Are You Ready to Sell Your Home
In total, there are 5 exit strategies used in real estate industry. All of these involves different methods of exiting and realizing returns. All these strategies are discussed below
FLIPPING
Flipping is short-term real estate transaction. It means buying a property and then selling it for an immediate short profit. It doesn’t involve any long-term hold. The period between buying and selling is usually ranges between 3 months to 1 year, not up to that.
HOLDING
Holding means buying a property asset then renting it out. Basically, it involves buying a property for rental purpose.
FLIPPING & HOLDING
Flipping and holding involves 3 steps
- Buying a property
- Rehabbing it
- Rent it out
Usually the bought property is not in good condition. Thus, fix percentage of money is invested in maintenance work. Ultimately, it will help to further increase the value of property.
LEASE
Leasing is renting out property to the tenant for specific time. Unlike renting, lump-sum amount is paid at once by the tenants to the landlord.
LEASE-OPTION
In a lease-option, a property is rented out to a tenant. However, at the end of a defined rental period, the tenant have the option to purchase the property.
WHOLESALING
The wholesaling process involves buying property at low price. Then, selling it to another investor at comparatively high price.